194419311942
CHAPTER 2 The Creation of Companhia Vale do Rio Doce
2.1 Born with a built-in expiration date Economic instability would also result in the creation of a new 41 currency, the cruzeiro, in October of the same year. It was the first At the moment when President Getúlio Vargas picked up his change to Brazil’s currency since independence in 1822. pen to sign Decree-Law 4,352,1 establishing Companhia Vale do Rio In 1942, Brazil – where the song “Ai que saudades da Amélia,” by Doce, on June 1, 1942, it is possible that he did not realize the true Ataulfo Alves and Mário Lago, had become an instant hit – needed importance of this act for the history of Brazil – and specifically for to find its way. The country needed money, it needed to nationalize the future of mining. Vale – alongside the National Steel Company its ore and, according to its American commercial partners, it (Companhia Siderúrgica Nacional, or CSN), created one year needed to join the war. Companhia Vale do Rio Doce, a company before – was more than just a pawn on the chessboard of wartime capable of expanding the supply of iron to the United States’ arms international relations. In a short time, it would gain a life of its industry, was fundamental. own and grow into one of the country’s biggest companies. Established by incorporating two existing companies – Companhia On June 1, 1942, Brazil was immersed in an institutional crisis Brasileira de Mineração e Siderurgia S. A., and Itabira de Mineração centered on the country’s decision on whether to enter the Second S. A. – the new company was also tasked with maintaining, using World War. Twenty days before, the merchant vessel Comandante and expanding the Vitória-Minas Railroad (EFVM). It was also given Lira had been torpedoed in Brazilian waters between Ceará and Rio Cauê Mine – minimally exploited during Percival Farquhar’s time as Grande do Norte, in an attack attributed to German submarines. In president of the Itabira Iron Ore Company – which would become a the days that followed, another three Brazilian ships had the same kind of symbol of Vale’s early days. destiny – the last of them, Alegrete, on June 1 precisely.2 In the article “O Brasil e seu minério de ferro” (“Brazil and its On the streets of Rio de Janeiro, then the capital of the Republic, the iron ore”), published in Observador Econômico e Financeiro in 1945, people began persecuting German immigrants, defacing their homes soon after the beginning of mining activity, Cauê was rated a high- with graffiti and throwing stones at their commercial establishments.3 productivity mine. “It is known that Cauê’s ore is found at the surface of the ground, and every blast dislodges 4,000 metric tons.” The first block of rock was removed by Vale on October 24, 1944. 1 - This decree expropriated the companies Companhia Brasileira de Mineração e It was the start of a project that would go beyond the mine itself Siderurgia S. A. and Itabira de Mineração S. A., as well as the Vitória-Minas Railroad and its entire track, buildings and rolling stock. It also established the articles of and start to determine the history of mining in Brazil. incorporation of the new company, Companhia Vale do Rio Doce S.A. The decree was As will be seen in due course, CVRD was the result of the signed by President Getúlio Vargas and ministers Artur de Souza Costa, Vasco Leitão so-called Washington Agreements, which provided for the da Cunha, João de Mendonça Lima, Oswaldo Aranha and Alexandre Marcondes Filho (available at:
Vale Our History Vale Our History Previous page: ore being extracted at Cauê Peak in Itabira, Minas Gerais, in 1944, and Decree-Law 4,352 establishing CVRD on June 1, 1942. To the left, from top to bottom: people celebrate the end of the Old Republic and the victory of the 1930 Revolution, and a paper factory in Petrópolis, Rio de Janeiro, signaling the start of the country’s industrialization. of July 17, and 20,799 of December 16 of the same year, which nationalization of mines and mineral deposits deemed essential to suspended all acts that implied the disposal of any mineral deposit.6 the country’s economic or military defense. The government’s interest in mining was also reflected in the The Code of 1934’s starting point was a distinction made administrative sphere. In the process of restructuring the Ministry between mineral deposits and mines. A deposit was considered to of Agriculture, Industry and Trade, the Directorate General of be the whole mass of mineral or fossil substances existing inside Mineral Production was created. Nearly one year later, in March or on the surface of the land that could be valuable to industry. In article 4 of the Statute to Establish Companhia Vale do Rio 1934, the National Mineral Production Department (DNPM) was Mines, on the other hand, were considered to be deposits in their Doce (an appendix to Decree-Law 4,352 of June 1, 1942), the following established in order to study all subjects concerning the country’s commercial sense: in other words, deposits themselves, plus their was written: “The company’s duration shall be 50 (fifty) years, mineral production and corresponding technical education, as well set of constituted property rights, the effects of exploration, and counting from the time of its constitutional assembly. However, the as subjects related to knowledge of the country’s geology and the also the ownership of the concession that represented them. general assembly reserves the right to deliberate at any time on the use of water to produce energy or for irrigation. For the purpose of harnessing deposits, the Code established extension of this period or the dissolution of the company before To complete this set of measures, on July 10, 1934, Decree 24,642 two different regimes. With regard to those already being mined the established term.” enacted the Mining Code. Alongside the Water Code, created on as of the publication date of the Code, it was determined that For 70 years, Vale, with the energy of a child, has been contradicting the same day, the Mining Code was the Provisional Government’s they could continue to be exploited, regardless of authorization or 42 the predictions of its own founding statute. most important contribution in terms of legal instruments for state concessions from the public authorities, provided that they were 43 intervention in the economy. Through it, the legal regime governing declared within a maximum period of one year, counting from mines instituted by the 1891 Constitution was substantially modified that same date. This declaration should state proof of the deposit’s – from then on, a fundamental distinction was established, for the existence, nature and conditions, as well as the extent of the 2.2 The Mining Codes of 1934 and 1940 purposes of mining, between ownership of the land and ownership property rights over it. Mineral substances used for construction of mineral deposits and other resources beneath the ground. did not require authorization or concessions. Their exploitation was When he took over as head of the Provisional Government on The new Code was composed of 95 articles, and its main reserved exclusively for the respective landowners, in accordance November 3, 1930, after the victory of the 1930 Revolution,4 Getúlio author was Domingos Fleury da Rocha, then director of the DNPM, with administrative regulations. Vargas began a widespread institutional reform to strengthen state supported by the Minister of Agriculture, Juarez Távora. Although it In relation to deposits that were known but not yet exploited intervention in the social and economic fields. The 1930 Revolution was signed on July 10, it was only published on July 23, days after as of the Code’s publication date, it was determined that they was an armed political movement led by the states of Minas Gerais, the passing of the 1934 Constitution, on July 16. The Constitution would continue to belong to landowners, but to exploit them, Paraíba and Rio Grande do Sul, which culminated in the end of gave legal support to the changes brought about by the Code, and they would require a concession from the government. In such the Old Republic. Among the novelties that came with the new the government became the main controller of the country’s policy cases, the landowners also had the preferential right to mine government was the popularization of a term until then little used for mineral prospecting and extraction. them, or to share the profits of exploitation. For the purposes of by Brazilians: industrialization. With the new Code, mineral deposits were now characterized the Code, deposits would only be considered to be “known” that As part of the strategy developed by Vargas, there could be as real estate, distinct and separate from the land where they were were declared to the public authorities within the same periods no industry without the full harnessing of the country’s mineral found. Exploiting them required authorization or a concession and in line with the same rules established in the previous case. It resources, especially iron. And, in a government with a nationalist from the federal government. Permits for prospecting and mining was also established that all deposits unknown before the Code’s profile, there would be no iron production until all of the deposits concessions would be given exclusively to Brazilians or companies publication date would, when discovered, become the federal were the property of Brazilians. The Mining Code needed to start constituted in the country. Landowners would be guaranteed government’s permanent and inalienable property. Deposits that to change. preference to exploit the deposits on their land, or to a share of the were known but not declared under the terms of the Code were The revolutionary government’s preoccupation with the profits if a mining concession were granted to third parties. also included in this category. exploitation of mineral resources was expressed for the first time The right to mining concessions would obligatorily depend on Mining concessions would only be granted following approval in February 1931. In a speech given in Belo Horizonte, Minas Gerais, prior prospecting work, whose economic value was recognized by the DNPM and publication of the respective concession decree. Vargas emphasized the need to nationalize mineral reserves, above by the DNPM.7 Concessions would last while mining activity The start of mining had to occur within no more than one year, all those of iron.5 This preoccupation gained force with Decrees 20,223 continued, and the surface area could not exceed the maximum except in circumstances of a justified impediment accepted by the
area established in regulations for each class of deposit. Finally, and government. The DNPM was also responsible for inspecting mineral
of fundamental importance, there were plans for the progressive deposit prospecting and mining work, and the mining companies had to submit annual mining reports to it. 4 - To find out more about the Revolution of 1930, see Candido, Antonio. A Revolução de Mining companies constituted under the Mining Code regime 1930 e a cultura. São Paulo: Cebrap, 1984 and O significado de Raízes do Brasil. São Paulo: 6 - See Pimenta, Dermeval. A Vale do Rio Doce e sua história. Belo Horizonte: Editora Vega, were exempt from import taxes for machines and tools that did Cia. das Letras, 1995; Fausto, Boris. A Revolução de 1930: historiografia e história. São Paulo: 1981, p. 59. The encumbrance of a mineral deposit is understood to mean an event Brasiliense, 1972 and História do Brasil. São Paulo: Edusp, 1995; Holanda, Sérgio Buarque that makes it the subject of a guarantee, for the purposes of a given business deal. See not exist in the country, and they would pay minimum charges de. Raízes do Brasil. São Paulo: Cia. das Letras, 1995; and Magalhães, Juracy; Gueiros, José also Schwartzman, Simon (org.). Estado Novo, um autorretrato. Brasília: Published by the for railroad and shipping transportation, and for wharfage and Alberto. O último tenente. São Paulo: Record, 1996. University of Brasília. Coleção Temas Brasileiros, 24, 1983, p. 565. transshipment services at ports. To benefit from these favors, at 5 - See Sodré, Nelson Werneck. História da burguesia brasileira. Rio de Janeiro: Civilização 7 - Simon Schwartzman (op. cit., pp. 566-568) presents a detailed description of administrative least two-thirds of the companies’ engineers and three-quarters of Brasileira, 1964, p. 263. changes to the former Geological and Mineralogical Service of Brazil (SGMB).
Vale Our History Vale Our History 44 their manual laborers had to be native Brazilians. The companies of the Code of 1934, the new Code incorporated the nationalist did not last for long: soon after, the contract was revised and its Previous page, Jornal de Itabira, 45 also had to run schools for manual workers and their children in principles of the 1937 Constitution. It was thereby established that termination was suspended. from left to right: a parade in 9 honor of Getúlio Vargas in the the vicinity of the mines, and found hospitals or provide medical the right to prospect or mine deposits could only be granted to After being examined by various levels of the state, Itabira’s 1940s, and a man working at services to treat their personnel, always with the approval of the Brazilian individuals or legal entities owned by Brazilian partners or contract was submitted by Vargas to the Congress in May 1935. The an iron foundry in the 1930s. government. shareholders. The functioning of mining companies would depend executive branch then made the construction of a steel mill optional On the day after the Code was enacted, the federal government on federal authorization, granted by the Ministry of Agriculture. To and called for the construction, at no cost to the government, of issued regulations on the payment of charges for prospecting gain this authorization, companies had to prove their constitutional a 500-kilometer railroad between the Port of Santa Cruz (Espírito permits and mining concessions, and for exploitable mines to begin arrangements and the Brazilian nationality of their partners or Santo) and Itabira (Minas Gerais) to permit the exportation of iron production. Mining concession-holders that did not own the deposits shareholders. In order to force the exploitation of declared deposits, ore. or mine would be obliged to pay annual charges to the federal the 1940 Code determined that if mining did not occur within five At the request of the legislature, the armed forces were government, in two six-monthly payments, amounting to 1.5% of years of that date, the reserves would be expropriated by the federal summoned to give their position on the subject. Through official the mine’s output. If a concession-holder were the landowner, it government. Mines were characterized as deposits being extracted statements, the heads of the armed forces declared themselves would be obliged to pay 3%. The taxes levied by the federal, state and, in turn, deposits were defined as the entire mass of mineral or to be against Itabira’s contract. In their opinion, the issue was not and municipal governments on mining concession-holders could fossil substance existing inside or on the surface of the land that only of economic nature, but also political, and above all, strategic not together exceed 25% of the company’s net income. represented value for industry.8 to national defense. From that point onward, the military played a decisive role in the struggle to build a major steel plant in Brazil.10 The New State (1937-1945) In 1935, the world was ever more divided between communists The establishment of the “New State” regime, on November 10, 1937, and capitalists – and Brazil had just left behind the so-called permitted even greater intervention by the state in the economic life 2.3 The outcome for the Itabira Iron Ore Co. Communist Conspiracy,11 an uprising initiated in army barracks. of the country. The new Constitution, which was immediately put into effect, legalizing the new regime, gave the public authorities The series of transformations in the Mining Code, starting with 9 - Various commissions were formed to examine the subject, such as the Commission to much more complex and active functions. The state now had the the Revolution of 1930, had direct consequences for the Itabira Iron Review the Itabira Contract and the National Steelmaking Commission, both established right to intervene directly in productive activities to overcome Ore Co. Itabira, the owner of the largest iron reserves in the country, in 1931, the Legal Commission of the Transport Ministry, and the Commission of the inadequacies in the private sector. Finally, with regard to mineral was linked to ever more urgent questions: the exportation of ore; Eleven, organized in 1933. With regard to the conclusions of the latter commission, see Pimenta, Dermeval, op. cit., pp. 49-50. exploration, the new Constitution established a definitive rule: the building of a large-scale steel mill; and finally, the possibility of 10 -��������������������������������������������������������������������� See Abreu, Alzira Alves de. “Companhia Siderúrgica Nacional” entry, DHBB, vol. 1, foreigners could no longer take part in the sector. a foreign company developing these projects in Brazil. available at:
Vale Our History Vale Our History Vargas’ nationalist message was echoed in Brazilian society. In mill. If it were impossible to have a monopoly, the Council proposed Europe, Hitler was gaining more power and passing laws against a model of mixed state-private ownership, extending the state’s Jews, making military service of more than one year obligatory control over all steel companies.15 In May, the National Security for men, and expanding his navy almost three-fold. The Second Council approved this proposal.16 World War started to become a reality. In this context, iron, fundamental to the production of weapons, was worth gold – and The end of the Itabira Iron Ore Company and Percival “the iron was ours.” Farquhar’s next moves On June 18, 1937, Itabira’s contract was once more discussed In 1939, the Itabira Iron Ore Company’s contract, signed years in the Chamber of Deputies. During the session, deputy and before, was declared definitively void by Decree 1,507 of August former President of the Republic Arthur Bernardes attacked the 11. As a result, Itabira lost all the federal and state concessions it project head on, describing it as harmful to national interests. He had held. However, in accordance with the Mining Code of 1934, it suggested replacing it with a project by which the government remained the owner of the land and iron mines of Itabira, given would, at an opportune moment, form a corporation, of which it that it had declared its deposits within the established timeframe,17 would be the majority owner, to mine iron ore, transport it on the and it also owned the majority of shares in the EFVM. Vitória-Minas Railroad, construct an ore quay in Vitória and build In fact, Itabira’s ambitions had already been drastically curtailed 46 a merchant fleet.12 in 1937. According to the new Constitution, as a foreign company, it 47 When Getúlio Vargas suspended Congress and instituted the would not be able to directly operate its mines. Given this obstacle, New State on November 10, 1937, the question of the Itabira Iron Percival Farquhar, seeking alternative options for the deposits Ore Co.’s contract was still not resolved. The president then asked belonging to the Itabira Iron Ore Co., partnered with Brazilian the Federal Foreign Trade Council and the Technical Council on capitalists. The company had two basic aims: to transport iron ore Economics and Finance to give their formal opinions on the issue. using the EFVM; and to operate the mines of Itabira. The final opinion of the latter entity, led by industrialist Pedro Accordingly, in August 1939, at the same time that Itabira’s Demóstenes Rache, was published in 1938, and it recommended contract was definitively liquidated by the government, Farquhar, accepting the Itabira Iron Ore Co.’s contract. In fact, the opinion now having the businessmen Gastão de Azevedo Vilela, Álvaro argued against state intervention in the economy, reflecting the Mendes de Oliveira Castro, José Monteiro Ribeiro Junqueira, Mário stance of private groups strongly represented on the council.13 W. Tibiriçá, Aminthas Jacques de Morais and Athos de Lemos In the same year, 1937, the Minas Gerais Society of Engineers also as partners, founded the Brazilian Mining and Steel Company pronounced on the subject, through a long report titled “National (Companhia Brasileira de Mineração e Siderurgia S.A., or CBMS), of Steelmaking and Exportation of Iron Ore,” produced by Francisco which he owned 47%. Decree 4,642 of September 6 of the following de Magalhães Gomes and submitted to the Minister of Transport year authorized the company’s operations, and Decree-Law 2,351 and Public Works, General João Mendonça Lima. The report opposed of June 28, 1940 authorized it to incorporate the Vitória-Minas Itabira’s project, emphasizing the tradition of the state of Minas Railroad Company, in exchange demanding the remodeling of the Gerais of defending national interests. It proposed building a existing line and the construction of two new stretches.18 Brazilian-owned steel mill fed by charcoal in the Doce River Valley. In July 1940, the CBMS began constructing the final stretch of the Unlike the Technical Council, the Minas Gerais Society of Engineers railroad, from Desembargador Drumond to Itabira, which would be argued for state intervention in the economy.14 completed in 1943. Following this, the Port of Vitória exported the The commission created by the Federal Foreign Trade Council first batch of iron ore (5,750 metric tons) from Itabira, to be shipped also came out against approving Itabira’s contract. In February to Baltimore, USA. The iron ore was compact hematite in lump form, 1939, it suggested establishing a state monopoly for the exportation of chemical and physical characteristics that made it possible to be of iron and manganese ore, besides organizing a state-owned steel used directly in steel mills. In 1941, the company, together with the state government of Espírito Santo, began work on a special ore wharf in Morro do Atalaia, opposite the city of Vitória. At this time, 12 -������������������������������������������������������������ Concerning this issue, see Monteiro, Norma de Góes (org.). Ideias políticas de Arthur the ore was transported in trucks from Itabira to Desembargador Bernardes. Brasília / Rio de Janeiro: Senado Federal / Casa de Rui Barbosa, 1984, vol. 2, pp. 494-504. 13 -������������������������������� See Carvalho, José Murilo de. A Escola de Minas de Ouro Preto: o peso da glória, op. cit., p. 15 -����������������������������������������������������������������� For further information, see Soares e Silva, Edmundo de Macedo. O ferro na história e na 110. The official statements of the commissions and councils about the case of the Itabira economia do Brasil, op. cit., Appendix VI, pp. XXIX-XXXVII. Iron Ore Co. and the exportation of iron ore were published in full in Guinle, Guilherme et First shipment of iron 16 -����������������������������� See Abreu, Alzira Alves de, op. cit., p. 857. al., A grande siderurgia e a exploração de minério de ferro em larga escala. Rio de Janeiro: Finance ore from the Port of Ministry, 1938, pp. 5-268. 17 - ��������������������������������According to Dermeval Pimenta, op. cit., p. 59, the Itabira Iron Ore Co. “declared its Vitória in Espírito 14 -������������������������������� See Carvalho, José Murilo de, op. cit., pp. 111-112. For more information on this subject, mineral deposits on August 5, 1938, and registered them as mines.” Santo, in Greek ship see Gomes, Francisco Magalhães. História da siderurgia no Brasil, op. cit., pp. 223-242. 18 -� Idem, ib. Modesta, in June 1940.
Vale Our History Vale Our History 48 From left to right: mine workings in Drumond and, from there, by train to Pedro Nolasco, from where it (Barra Mansa plant, Rio de Janeiro, 1931) and Companhia Siderúrgica Lisboa. The commission recommended constructing a plant to be 49 the Cauê Peak region in Itabira, Minas was once more carried in trucks to the quays of the Port of Vitória, Belgo-Mineira (Monlevade plant, Minas Gerais, 1937).21 Although administered by a Brazilian corporation, which would be organized Gerais; Governor Punaro Bley receives 19 22 a delegation led by Afrânio de Mello where it was stored to be loaded onto ships. progress had undeniably been made, Brazil’s self-sufficiency in iron and managed jointly by the Brazilian government and US Steel. Franco to inspect construction work In December 1941, a group of Brazilian businessmen, composed and steel was far from being achieved: more than 75% of the rolled This mill would initially produce 285,000 metric tons per year on the Atalaia ore quay in Vitória, of Afonso Pena Júnior, Edmundo de Castro Lopes, José Monteiro steel consumed in the country was imported. In the late 1930s, the of finished products, including railroad tracks and accessories, Espírito Santo, at the start of the Ribeiro, Álvaro Mendes de Oliveira Castro, Francisco F. Pereira, Brazilian steel industry was still small, based on the use of charcoal, sections, round and flat iron, plate, sheet metal, and pig iron for 1940s; overview of the Belgo-Mineira steel mill; and a parade to honor Gastão de Azevedo Vilela, Mário W. Tibiriçá and Aminthas Jacques a fuel that was increasingly expensive and difficult to obtain. smelting. It was also established that the plant would use coke Getúlio Vargas and the creation of a de Morais, Farquhar’s partners in the CBMS, founded Companhia The first steps to change this situation were taken in January obtained by mixing coal from Santa Catarina with imported coal, national steel industry, in the 1940s. Itabira de Mineração (Itabira Mining Company), with the aim of 1939 when, at the suggestion of the Minister of Transport, João and that it would be located near the city of Rio de Janeiro, close operating the Itabira Iron Ore Co.’s mines. Farquhar proposed that de Mendonça Lima, President Vargas sent Lieutenant Colonel to the suburb of Santa Cruz. The steel mill would be served by the the group would lease the mines, rights and properties from the Edmundo de Macedo Soares to Europe, tasked with negotiating Central do Brasil Railroad, and the Port of Laguna (Santa Catarina) Itabira Iron Ore Co., and would have an option to purchase them. the sale of Brazilian iron ore. However, the impending outbreak of would be prepared to ship out coal.24 As payment for transferring this option, the recently established the Second World War meant that European countries had little company would have to pay the sum of 30 million réis, as well as interest in investing in Brazil. In March, during a mission to the Loans from Eximbank to CSN US$1.3 million for the mine lease, for 25 years.20 This transaction, United States, the Minister of Foreign Affairs, Oswaldo Aranha, In March 1940, the Executive Commission of the National however, was never completed. The Washington Agreements, signed made contact with the United States Steel Co. (US Steel), then the Steelmaking Plan was created to establish the principles for building the following year, would change the course of history once more. biggest steel producer in the world, which expressed interest in Brazil’s first large steel mill. The commission, whose members collaborating with the Brazilian government to build the first coke- included businessmen Guilherme Guinle and Edmundo de Macedo fed steel mill in the country.23 Soares (the main people responsible for the mill’s financial and In June of that year, US Steel sent technicians to Brazil to technical plans, respectively), foresaw average annual production 2.4 Establishment of the National Steel study the feasibility of building a major coke-fed steel mill, with of 300,000 metric tons of medium and heavy sections, tracks, plate Company (Companhia Siderúrgica Nacional) a mixture of private and public sector capital. At this time, a and sheet metal. In terms of the plant’s location, the site finally joint commission of American and Brazilian technicians was set chosen was Volta Redonda, at the time a district of the municipality up, whose members included Edmundo de Macedo Soares, Plínio of Barra Mansa, in the state of Rio de Janeiro.25 The year 1939 was of fundamental importance, not only to the Cantanhede, João Batista da Costa Pinto and Joaquim Arrojado After long and eventful negotiations with the United States outcome of the Itabira case, but also to the building of a major government, involving the granting of permission for the US to steel mill in the country. Since the beginning of the decade, the install military bases in the northeast of the country, Brazil obtained country’s iron and steel production capacity had been increasing a US$20-million loan from Eximbank (Export-Import Bank), a US due to investment in the building of new plants and the expansion 21 -���������������������� See Suzigan, Wilson. Indústria brasileira: origem e desenvolvimento, op. cit., pp. 275-277. See also Fernandes, Francisco do Rego (org.), Os maiores mineradores do Brasil: perfil empresarial credit institution concerned with export and import business and of existing ones, undertaken by companies such as Companhia Ferro do setor mineral brasileiro. São Paulo: EMEP, 1982, vol. 2, pp. 670-671. The article “Amplo international funding to acquire machinery. At a general assembly Brasileiro (Caeté plant, Minas Gerais, 1931), Siderúrgica Barra Mansa inquérito sobre o problema do ferro no Brasil,” Observador Econômico e Financeiro, October 1943, pp. 107-140, provides details of the steelmaking projects of various private Brazilian held on April 9, 1941, Companhia Siderúrgica Nacional (CSN) was companies. finally established, with paid-up capital of 500 million cruzeiros. In 22 -������������������������������ According to Wilson Suzigan, op. cit., p. 596, from 1930 to 1940, pig iron production 19 - ��������������������������������See Ribeiro, Lucílio da Rocha. Pequena contribuição à história da Estrada de Ferro Vitória a rose from 35,305 to 185,570 metric tons, steel production increased from 20,985 to Minas, op. cit., pp. 77-78. 141,201 metric tons, and rolled iron output expanded from 25,895 to 135,293 metric tons. 24 - �����������������������������See Abreu, Alzira Alves de, op. cit., p. 858. 20 - ������������������������See Pimenta, Dermeval, op. cit., pp. 64-65. 23 - ����������������������������������������See Soares e Silva, Edmundo de Macedo, op. cit., pp. 114-122. 25 - �Idem, ib.
Vale Our History Vale Our History Israel Pinheiro
Even before becoming president of Companhia Vale do Rio Doce, Israel Pinheiro (Caetés, Minas Gerais, 1896 – Belo Horizonte, Minas Gerais, 1973) was in many ways exchange for its loan, the United States demanded the creation of In turn, the United States government committed to granting a already part of Vale. Before the company was established, an executive office composed of Brazilian and American engineers, loan of US$14 million through Eximbank. These resources would he participated in the negotiations for the Washington tasked with coordinating all of the work of making final calculations be used to purchase American equipment, machines and services Agreements between Brazil, Great Britain and the USA, for the plant and selecting materials.26 required to restore and extend the Vitória-Minas and equip the which resulted in the expropriation of the Itabira Iron Ore The construction of the mill in Volta Redonda began in 1941. The mines of Itabira and the Port of Vitória. Company and, finally, the creation of CVRD in 1942. During first parts to begin operating, in April 1945, were the coke ovens and The package’s overall objective was to ensure the production, byproducts sector (which produced substances such as tar, pitch, transportation and export of 1.5 million metric tons per year, to be the company’s first year, he was appointed superintendent, benzene and naphtha). By the end of the Second World War, 80% of bought in equal shares by the United States and Britain, for a period and he served as its president from 1943 to 1945. the plant had been completed. As a result of CSN’s establishment, of three years, at prices considerably below the prevailing market Pinheiro qualified as an engineer from the Ouro Preto Brazil’s annual steel output rose from 205,935 metric tons in 1945 to level. The three-year contract could be renewed until the end of the Mining School and worked in various administrative 27 788,557 metric tons in 1950. During the period when the plant was war. Once the conflict was over and the last three-year contract had spheres of the state government of Minas Gerais before being built, the Central do Brasil Railroad’s tracks were extended, come to an end, the United States and Britain would still have the being appointed president of CVRD. His short time connecting Rio de Janeiro to Volta Redonda. The Nova Iguaçu-Barra right to acquire ore, but now at free market prices. running the company was marked by investment in mine do Piraí stretch was also electrified. The Brazilian government would now finally expropriate the mechanization, the company’s export-oriented profile, and 50 Vitória-Minas Railroad (EFVM) and reequip the production complex 51 by creating a company tasked with extracting, transporting and its care for employees. After leaving CVRD, he returned to shipping ore from Itabira. This company would be administered by politics, his greatest vocation. Close to Juscelino Kubitschek, Brazilian and American directors until all the loan payments had 2.5 The Washington Agreements and the he was the first mayor of Brasília (1960-1961), and he later been paid and obligations met, at which point the mine operations served as governor of Minas Gerais between 1966 and 1971. establishment of Companhia Vale do Rio Doce would revert fully to the Brazilian government. In April 1942, a Special Commission to Regulate the Washington By the start of the 1940s, the Second World War was well Agreements was set up, with the aim of presenting a report on the under way and a harsh reality. The Western powers were seeking extraction, transportation and exportation of iron ore. After the alternative ways of supplying their arms industries with raw Brazilian, American and British governments approved the report materials, especially iron. Brazil, which until then had not managed and ratified the agreements, President Getúlio Vargas issued Decree- to solve its basic problems of exporting ore, found a good opportunity Law 4,352 of June 1, 1942, establishing the principles for constituting to establish its position on the global market. The Washington Companhia Vale do Rio Doce (CVRD, named for the Doce River Agreements played a fundamental role in this.28 Valley in which its operations lay) and expropriating Companhia Signed on March 3, 1942 by the governments of Brazil, Great Brasileira de Mineração e Siderurgia S.A. and Companhia Itabira Britain and the United States, the Washington Agreements defined de Mineração.30 The shareholders of Companhia Brasileira de the principles for establishing a company in Brazil to export iron Mineração e Siderurgia S.A. would be compensated in cash by the ore. Through these agreements, the British government agreed to federal government. In addition, the contract signed in June 1940 acquire the iron ore reserves belonging to the Itabira Iron Ore Co. by the company and the government concerning the remodeling and transfer them to the Brazilian government at no cost. At this and extension of the EFVM would be terminated. The shareholders time, the properties of the Itabira Iron Ore Co., all located in the of Companhia Itabira de Mineração, which was still in the process municipality of Itabira, were as follows: Cauê, Serra da Conceição, of being constituted, would also receive compensation. The amount Dois Córregos, Dirão e Onça, Itabiruçu, João Coelho, Borrachudo, to be paid took into account the company’s ore stocks, facilities, Santana, Sumidouro, Campestre-Manuel Anastácio and Rio do vehicles and equipment. Peixe. In all, this set of properties covered more than 74 million Until the definitive establishment of CVRD, the properties square meters.29 taken over by the federal government would be administered by a superintendent. The government appointed Israel Pinheiro to this position, a qualified engineer, the Secretary of Agriculture of Minas 26 - �Idem, ib. During the Second World War, the United States’ foreign policy toward its allies Gerais, and a member of the Special Commission. strongly favored economic autonomy initiatives, understood as a way of strengthening them and ensuring solid support. See Malan, Pedro Sampaio et al., Política econômica externa e industrialização do Brasil: 1939-1952. Rio de Janeiro: IPEA, 1977. 27 -������������������������������������������������� See Malin, Mauro. “Dutra, Eurico Gaspar” entry, DHBB, vol. 2, p. 1,147. 28 - ���������������������������������������������������������������������������������Information about the Washington Agreements was taken from Fernandes, Francisco do Rego (org.), op. cit., vol. 1, pp. 16-17. There were six agreements in all, but just two dealt with subjects related to mining. See also Pimenta, Dermeval, op. cit., pp. 79-80. 30 -������������������������ See Pimenta, Dermeval, op. cit., pp. 86, 107. For the full decree, see Brazil, Ministry of 29 - ������������������������See Pimenta, Dermeval, op. cit., pp. 60-61. Mines and Energy, Legislação, vol. 2, pp. 41-43.
Vale Our History Vale Our History Previous page (top): the president of CVRD, Israel Pinheiro (in a white suit), and his delegation visit the Atalaia ore quay at the Port of Vitória in Espírito Santo. Previous page (bottom): iron ore being unloaded from trucks at the Port of Vitória.
52
To the right: busy operations at Cauê Mine in Minas Gerais, in 1943.
Vale Our History Vale Our History Ore being extracted manually and carried in straw baskets to wagons in Presidente Vargas, Minas Gerais, in 1942, the year CVRD was established. Opposite page: Cauê Peak in the first years of ore extraction, between 1942 and 1945.
54 55
Vale Our History Vale Our History Previous page (left): a meeting between the Brazilian and British governments – represented, respectively, by the Minister of Foreign Relations, Oswaldo Aranha, and Ambassador Noel Charles – ratifying the terms of the Washington Agreements of March 1942, which provided for the transfer to Brazil of the Itabira Iron Ore Co.’s mines, goods and facilities, as well as the EFVM. Previous page (right): workers at Cauê Peak in Minas Gerais.
56 CVRD would be constituted as a partially government-owned On January 11, 1943, the assembly to definitively constitute corporation, with initial paid-up capital of 200 million réis. Its board Companhia Vale do Rio Doce was held in Rio de Janeiro.31 At the would be composed of five members: a president and two directors meeting, the company’s articles of incorporation were approved, of Brazilian nationality, and two American directors. The company as was the transfer to its ownership of the mines of Itabira, “as would be organized in two basic departments: one for the Vitória- the federal government received them,” as well as the EFVM Minas Railroad, to be administered by Brazilian directors; and the and all the assets that had belonged to Companhia Brasileira de other for the mines of Itabira, run jointly by Brazilians and Americans. Mineração e Siderurgia S.A. and Itabira de Mineração S.A. The total Israel Pinheiro had the provisional status of superintendent for value of the deal was 80 million cruzeiros.32 It was determined that six months – from June 1942 to January 1943 – until the company CVRD’s administrative headquarters would be located in the city of was formally constituted. There was a great deal of complex work Itabira and that its domicile for all legal purposes would be in the to do in little time. Pinheiro would have to administer the properties municipality of Rio de Janeiro. incorporated by the federal government and the EFVM, continue the The company’s board would be composed of a president, freely work to extend the railroad on the stretch between Desembargador appointed by the President of the Republic, and four directors chosen Drumond and Itabira, develop the iron mines of Itabira, build a by the general assembly. After six months as superintendent, Israel special pier, and expand the Port of Vitória. Pinheiro was appointed as president of CVRD, thereby continuing to During these months, a number of important initiatives were run it. The directors elected were the Americans Robert K. West and taken. Negotiations with Eximbank was initiated to obtain a US$14- C. Alvin Lawrenson,33 representing Eximbank, and the Brazilians milion loan, and the American consultancy firm Parsons, Klapp, General Denis Desiderato Horta Barbosa, who was appointed vice- Brinckerhoff & Douglas (PKBD) was hired to produce technical president, and Major João Punaro Bley, the governor of Espírito studies and designs required to develop the mines and reequip Santo. The presence of Israel Pinheiro and Punaro Bley, prominent and remodel the EFVM. PKBD was also responsible for acquiring figures on the political scenes of Minas Gerais and Espírito Santo, equipment and materials to be used to implement the program. reveals the federal government’s concern in aligning the board with During this period, around 8,000 metric tons of materials were the political power in those states, which were the most directly imported from the USA, mainly railroad tracks and accessories. involved with CVRD’s operations. The purchase (or leasing) of 90 train cars and nine locomotives enabled 41,000 metric tons of iron ore to be transported during these months. In addition, work on building the branch line between Itabira and the deposits of Cauê was begun. Finally, the first tracks 31 - CVRD’s articles of incorporation were fifiled led at the National Department of Industry were laid on the stretch between Capoeirana and Itabira, and work and Trade, registration number 18,689, on January 27, 1943, and published in the official on the ore wharf in Vitória continued. gazette (Diário Oficial) on the following day, Section I, p. 1,282. At the end of 1942, the superintendent issued a statement 32 - ������������������������������������������������������������������Ordinance 5 of the Finance Ministry, cited in Pimenta, Dermeval, op. cit., p. 111. Decree- Law 7,491 of October 5, 1942 instituted the cruzeiro as a currency to replace the thousand- regarding CVRD’s share subscription: 110 million réis would be réis. This explains the expression in cruzeiros of the values of the financial transaction Top of page: ore deposit at subscribed by the national treasury (common shares), and 90 million conducted. Areão Mine in Itabira, Minas réis could be invested by the public (preferred shares). At the time, 33 -������������������������������������������������������������������������������������������ Although article 15 of the articles of incorporation did not refer to the nationality of Gerais. Below: the Vitória-Minas the company’s assets were estimated to be worth 739 million réis. the directors, Decree-Law 4,352 (article 5, paragraph 4) determined that two of the five Railroad transporting ore at the directors of CVRD must be American. See Pimenta, Dermeval, op. cit., p. 112. start of the company’s activities.
Vale Our History Vale Our History Opposite page: ore being loaded in 1944 (top), and, in the same year, technicians from Companhia Raymond-Morrison Knudsen do Brasil S. A., responsible for work on the EFVM (bottom).
2.6 CVRD’s early years that the railroad, extending for almost 600 kilometers, crossed municipalities that lacked any facilities.35 58 Concerned to achieve its target of exporting 1.5 million metric Despite all these problems, in August 1943 – four decades after 59 tons of iron ore as agreed in the Washington Agreements, CVRD’s work on building the railroad began – the EFVM’s tracks finally first board concentrated its efforts on improving the workings of reached Itabira, thereby enabling the regular loading of ore at the the mine-railroad-port complex. In order for this goal to be met town’s recently opened train station. In October, the American- satisfactorily, it was essential to obtain the resources from Eximbank owned firm Raymond-Morrison Knudsen do Brasil S.A. was hired to as provided for in the agreements. administer work on the railroad. Various Brazilian companies were On March 18, 1943, a financial agreement was signed by the invited to provide earthmoving services. Brazilian government, CVRD and Eximbank, through which On the administrative level, due to the absence of suitable the American bank would lend US$14 million. This money was buildings and communications infrastructure in Itabira, the earmarked to fund the work of expanding the Itabira mines’ headquarters remained for some months in Belo Horizonte, at production capacity, rebuilding and reequipping the Vitória-Minas the offices of the former Mines Department. As a result of this Railroad, and constructing the ore wharf in Vitória. The loan would situation, the company was authorized to temporarily transfer its involve promissory notes issued by CVRD, payable over 20 years administrative headquarters to Rio de Janeiro.36 starting from the date of issue, at an annual interest rate of 4%.34 At the end of CVRD’s first year of activity, infrastructure building The maturity period was subsequently extended to 25 years. Having work had already consumed its entire capital. As a result, at an guaranteed external resources, CVRD stepped up the pace of the extraordinary general meeting held on July 15, 1944, shareholders work carried out by its Itabira Mines Department, which employed authorized an expansion of its capital from 200 to 300 million around 6,000 workers in 1944. cruzeiros. During this same meeting, the board was authorized to However, at the mines of Itabira, the recently started issue 300 million cruzeiros in debentures. operations employed rudimentary processes, without any Likewise, the loan provided by Eximbank (US$14 million) was mechanical equipment. The ore was still transported in trucks evidently insufficient. Urgently requiring railroad materials to to the end of the EFVM’s tracks in Oliveira Castro, 22 kilometers reequip the Vitória-Minas Railroad due to rising freight volumes, from the Cauê mineral deposit. The Vitória-Minas Railroad CVRD’s board negotiated an additional US$5-million loan from was also in a very precarious state: with its worn tracks and the American bank. This sum was released on March 1, 1945, after practically worthless crossties, the railroad did not provide safe Eximbank’s demand for the national treasury to guarantee the conditions for any of the trains, whether carrying iron ore, other operation was met.37 goods or passengers. CVRD’s report of 1943 mentions the occurrence in that year of 35 - ��������������������������See Kury, Mário da Gama. Companhia Vale do Rio Doce – 40 anos. Rio de Janeiro: Nova around 100 derailments per month, caused by the dreadful state of Fronteira, 1982, pp. 27-28. For more information about working conditions in the early the tracks. The company also faced problems hiring workers, given years of Companhia Vale do Rio Doce, see Minayo, Maria Cecília de Souza. Os homens de ferro: estudo sobre os trabalhadores do Vale do Rio Doce, em Itabira. Rio de Janeiro: Dois Pontos, 1986, especially Chapter 1, “A época do muque,” pp. 35-68. In the social field, CVRD concentrated its initiatives on combating malaria and improving sanitary conditions in general. See Pimenta, Dermeval, op. cit., p. 121. 36 - ������������������������See Pimenta, Dermeval, op. cit., p. 118. 34 - �Idem, ib., p. 114. 37 - �Idem, ib., pp. 117-118.
Vale Our History Vale Our History Previous page (top): the access bridge to the Atalaia quay and ore silo at the Port of Vitória, Espírito Santo. Previous page (bottom): the president of CVRD, Dermeval Pimenta (in the center), with a parliamentary commission visiting Cauê Mine in Itabira, Minas Gerais, in the 1940s.
60 61
Dermeval Pimenta
Dermeval Pimenta (São João Evangelista, Minas Gerais, 1893 – Belo Horizonte, Minas Gerais, 1991)1 was appointed president of Companhia Vale do Rio Doce in 1946. At the time he was 50, with a diploma from the Ouro Preto Mining School and experience in public administration. He was prepared for the job. With the end of the Second World War and the decline in American investment in the arms industry, iron ore had few buyers on the market. After three years looking for loans, Dermeval saw the post-war world starting to rebuild itself, the price of iron rose, and Vale started to grow once more. By the time he left the company’s presidency in 1951, the Vitória-Minas Railroad had been modernized and exports had quadrupled. He was always a champion of Vale. He wrote a book celebrating CVRD’s 40th anniversary in 1982 – a precious historical document. Dermeval Pimenta also had successful spells at steel companies Usiminas, Belgo-Mineira and Acesita. View of the Doce River in 1944.
1 - See “Pimenta, Dermeval,” DHBB, volume 4, pp. 4,617-4,618 and “Conheça todos os presidentes da história da Vale” (Learn about all the presidents in Vale’s his- tory), ExameVale magazine,Our April History 5, 2011. Vale Our History Despite having faced various setbacks, the progress made made themselves felt, the demand for iron ore remained low and by CVRD in these first years was significant. The importation prices were consequently unrewarding.39 of equipment, although delayed, ensured a certain degree of The difficulties faced by CVRD were worsened by the high costs operational continuity. By mid-1944, when the contract between of maritime freight – Brazil was competing against countries such as CVRD and PKBD was ended, the plans for mines and the railroad Canada and Venezuela, closer to the main consumer markets (the were practically ready, and their completion was the responsibility United States and Europe). The lack of an adequate sales structure of Vale’s own technical department. As a result of investment led CVRD to subject itself to a large number of intermediaries, in the EFVM’s construction projects, by April 1944 the train cars which paid it prices well below those prevailing on the international were loaded next to the mines, raising the efficiency of railroad market. The global market had changed, and it was essential to transportation and, as a consequence, ore exports. Although the reduce the cost of iron ore. company did not come close to meeting its export target of 1.5 Alongside this difficult economic and financial situation, million metric tons per year, exports destined for England, for at the start of 1946 the company experienced its first change of example, rose from 35,406 metric tons in 1942 to 62,928 in 1943, management. Elected federal deputy for Minas Gerais in December 62 and then 127,194 in 1944. With the end of the Second World War 1945, Israel Pinheiro left the presidency of CVRD in February of the 63 and reduced global steel production, exports of ore then fell back following year, to be replaced by Dermeval José Pimenta, an engineer noticeably in 1945 to 101,694 metric tons.38 who was appointed by the President of the Republic, General Although the export figures oscillated, development projects in Eurico Gaspar Dutra. João Punaro Bley and Robert West retained the Doce River Valley region progressed well. The company’s presence their positions on the board, as commercial director and director in the area was of great importance, attracting new investment. By of American business, respectively. The position of finance director the end of 1945, many companies had moved to the valley, notably was held by another American, Bernard A. Blanchard. At that the Vitória Iron and Steel Company (Companhia Ferro e Aço de time, the position of vice-president was vacant. The Itabira Mines Vitória), the Itabira Iron and Steel Company (Companhia Ferro e Department was run by American engineer Gilbert Whitehead, Aço de Itabira), agricultural enterprise Companhia Agro-Pastoril, and the Vitória-Minas Railroad was the responsibility of Brazilian and the Doce River Sugar Company (Companhia Açucareira do Rio engineer Delecarliense Alencar Araripe.40 Doce), the latter two in the municipality of Governador Valadares Dermeval Pimenta – a man with more of a technical than (Minas Gerais). political profile – and his directors were well aware of the problems that the company faced, as demonstrated by its 1946 report.41 In that year, CVRD recorded its lowest sales since 1943, with exports falling to 40,962 metric tons, sold at an average price of US$5.30 per 2.7 The company’s financial situation metric ton on an FOB (free on board) basis (meaning that the costs in the post-war period following the embarkation of goods are the responsibility of the purchaser).42 To reverse this unfavorable situation, new financial support was required, to be used to mechanize the mines, repair Focused from the beginning on the external market, Companhia the railroad and modernize facilities at the Atalaia Quay at the Port Vale do Rio Doce was affected by instability in the international economy. When the Second World War ended in 1945, the company’s exclusive sale of iron ore to Great Britain and the United States 39 - ���������������������������������������See Abranches, Sérgio; Dain, Sulamis. A empresa estatal no Brasil: padrões estruturais e came to an end, as the two countries relinquished their option to estratégias. Rio de Janeiro: Finep, 1978, unpublished academic paper, p. 44. renew their contracts. If, on the one hand, this decision reduced 40 - See Pimenta, Dermeval, op. cit., pp. 132, 140. After leaving the presidency of CVRD, Dermeval Pimenta became a director of railroad company Rede Mineira de Viação in April the pressure to export ore, on the other hand it left CVRD without 1951. The following year, he was one of the founders of steel company Usiminas. Later, he guaranteed markets in the short and medium term. The end of served as a director of steel company Acesita. During his public life, he held a number of the global conflict caused a reduction in steel production on an other positions, including Mayor of São João Evangelista, his home town, and Secretary of Transport and Public Works of Minas Gerais. In the 1980s, he was a member of the Culture international scale, and until the effects of European reconstruction Administration Council of Minas Gerais and the board of directors of the Minas Gerais Development Bank. He published 19 works, mainly technical, notably A Vale do Rio Doce e sua história; O parque ferroviário de Minas Gerais; O transporte de matérias-primas e produtos siderúrgicos; and Aspectos do povoamento do Leste Mineiro (with Jornal da Vale, August 1991, p. 4). 41 -����������������������������� Companhia Vale do Rio Doce, Relatório correspondente ao ano de 1946 (1946 Annual Report), n.p. Men working to break up a rock in 1944. 38 -�������������������������� See Kury, Mário da Gama, op. cit., pp. 29-30. 42 - ��������������������������See Kury, Mário da Gama, op. cit., p. 31.
Vale Our History Vale Our History 64
A train traveling past the Cachoeira Escura (“Dark Vasco Coutinho Station, Espírito Waterfall”) in the present-day municipality of Belo Santo, on the EFVM. Itapocu Oriente, Minas Gerais, in the 1940s or 1950s. Peak can be seen in the background.
Vale Our History Vale Our History Previous page, from left to right: the EFVM’s tracks and a visit from President Dutra to the Doce River Valley in 1947. Left: a train on a bridge over the Santo Antônio River.
66 of Vitória in Espírito Santo. During 1946, CVRD issued its third and to September 1, 1948 was US$2.64 million, and the value effectively council to advise the board and president did not meet the bank’s he maintained a liberal stance on mining policy in Brazil. This was 67 final set of debentures as planned in 1944, amounting to 100 million paid added up to a mere US$548,016.23. According to the contract expectations; the desire to include bank representatives on the board reflected in CVRD’s new articles of incorporation. cruzeiros, and obtained a loan of 30 million cruzeiros from Banco of 1943 (which had been denounced by Eximbank for not having of directors was rejected and CVRD’s president maintained the right The amendments to the articles of incorporation approved at an do Brasil,43 with the intention of using these additional resources to been signed by the company president), this released CVRD from to set the company’s course. extraordinary general meeting of February 7, 195049 established that continue essential construction work. the obligation to pay the difference of US$2,091,983.77.46 Eximbank continued to insist on reducing the president’s the company would be administered by a collective entity to plan Another major problem experienced in the late 1940s was functions to those of a mere supervisor. This demand was and guide activities, monitor results and issue financial accounts, growing interference by the American directors in the company’s Eximbank’s loan definitively rejected in January 1950, through changes mandated composed of CVRD’s president and four directors, domiciled and administration. In 1946, Dermeval Pimenta attempted to raise a While negotiations continued at a slow pace, Companhia Vale do by President Eurico Gaspar Dutra to the proposed reform of the resident in Brazil, elected at shareholders’ general meetings. new loan of US$7.5 million from Eximbank and issue new shares in Rio Doce’s situation deteriorated rapidly. By the start of 1948, its company’s articles of incorporation,47 confirming the president’s The new articles of incorporation also established that the company the company. The loan negotiations extended to 1948, given that in financial resources were running out and construction work was powers and preserving CVRD’s autonomy. would have an Administrative Division and a Financial Division as its exchange, Eximbank demanded not only a reduction in the powers practically suspended. In the light of this critical situation, the federal central executive bodies. The directors of these divisions would be of CVRD’s president, thereby giving the American directors more government bought new shares in the mining company, increasing The Cold War, anti-communism and “the oil is ours” appointed by the company president, from among board members or autonomy, but also a reworking of the mechanism for paying back its paid-up capital to 650 million cruzeiros, and gave guarantees Eurico Gaspar Dutra was a career military official who had been otherwise, and would report to him directly. The position of general the initial loan of US$14 million, already partially repaid.44 to back up the request for a loan from Eximbank. These measures the Minister of War between 1936 and 1945, and he became the superintendent, reporting to the president, was maintained. In fact, Eximbank protested against the terms of the contract were approved by the National Congress on February 17, 1948. At the president of Brazil through direct elections following President Given this new structure – in which it had less power over final of March 18, 1943, signed without the approval of the national same time, a parliamentary commission was established to promote Vargas’ 15-year rule. It was a defining moment for the country. Dutra decisions – Eximbank not only withdrew its representatives from treasury, according to which interest and capital would only be paid strict control of the use of the new resources to be given to CVRD was elected as part of a coalition between the Social Democratic CVRD’s board, but also declared its intention to no longer participate from resources generated by iron ore exports. Only 15% of the value and to assess the possibility of completing the planned construction and Brazilian Labor parties (PSD and PTB, respectively), receiving on it. This decision made it possible, later in 1950, for company of exports would be allocated to paying the promissory notes for work and the conditions for executing the planned program. more than 3.2 million votes (54.16% of the total). He took office in president Dermeval Pimenta to appoint Brazilian directors to fill the loan in question. After 25 years, the promissory notes would be Despite the progress in negotiations, two main questions 1946, the same year in which a new Brazilian Constitution would the vacant positions. returned to CVRD as redeemed, even if the funds generated by the remained: the form of payment for the promissory notes related to be passed by Congress. Following the end of the Second World War With the resources obtained at the end of the 1940s, the company 15% of exports were not sufficient to pay their balance. the US$14-million loan; and changes in company management. On and the totalitarian years of the New State, the country was looking was able to intensify its program of construction work essential to These payment conditions had been based on the forecast that July 5, 1948, during a general shareholders’ meeting, the two issues forward to times of democracy, peace and progress.48 operating the railroad, and extracting and exporting iron ore. In 1948, two years after signing the contract, in other words as of 1945, CVRD were at the center of discussions. After the Cold War began in March 1946, Brazil’s alignment for the first time, the company made a profit, amounting to 4,214,592.63 would be exporting a total of 1.5 million metric tons of iron ore per According to a resolution passed at the meeting, changes to the with the United States and anti-communist pressure culminated cruzeiros.50 In fact, this profit was significantly influenced by the year. As this had not been achieved, Eximbank argued that there original loan’s conditions were approved, as demanded by Eximbank in the breaking off of relations with the Soviet Union (something recovery in international iron ore prices. The average price per metric would be losses if company management were not efficient and as a condition for granting the new loan. CVRD assumed the obligation that would continue until 1962). Dutra was leading the country at ton on an FOB basis rose from US$5.22 in 1947 to US$6.67 in 1948.51 satisfactory.45 In fact, the value of the promissory notes expiring up to fully pay off all the promissory notes issued on March 18, 1943 a historic moment, but he is perhaps best known for – supposedly Growing exports of lump ore largely went to the United States. – not just those that had not yet expired, but also those partially at the behest of his wife, Carmela Dutra – prohibiting gambling However, in an attempt to diversify its markets, sales were also made paid and already redeemed by the company and considered paid by in Brazil. He also banned the Brazilian Communist Party. He to Canada and Western European countries. The predominance 43 -� Idem, ib., p. 32, and Pimenta, Dermeval, op. cit., pp. 117-118. Eximbank. Although its loan payment demands were met, Eximbank experienced the entire “the oil is ours” campaign, but unlike Vargas, 44 - ������������������������������������������������������������������������������For further information about this, see Fernandes, Francisco do Rego (org.), op. cit., vol. did not have the same success regarding management changes. The 1, pp. 18-26, and Pimenta, Dermeval, op. cit., pp. 149-150, 170-173, 217-228, 237-238, and creation of the position of general superintendent and a technical 49 -������������������������������������������������������������������������������������� Information about the reform of CVRD’s articles of incorporation was taken from the 260-267. 47 -������������������������������������������������ See the terms of the presidential order in the Diário Oficial of January 24, 1950, p. 1,179. Diário Oficial of March 8, 1950, pp. 3,330-3,332. 45 -������������������������������������������ See Fernandes, Francisco do Rego (org.), op. cit., p. 20, and Pimenta, Dermeval, op. cit., p. 48 - Malin, Mauro. “Eurico Gaspar Dutra” entry. Dicionário Histórico-Biográfico Brasileiro Pós-1930. 50 - ������������������������See Pimenta, Dermeval, op. cit., p. 273. 284. 46 - ������������������������See Pimenta, Dermeval, op. cit., p. 285. CPDOC/FGV. Available at:
Vale Our History Vale Our History 68 69
Panoramic view of the Port of Vitória, Espírito Santo.
Vale Our History Vale Our History of the American market was a direct reflection of affairs in the Table 1 shows changes in the company’s iron ore exports post-war period: with the European steel industry having been between 1942 and 1950, broken down by country, including the dismantled, in the short term the United States was practically the amount acquired by each country and its share of total sales. only market capable of absorbing CVRD’s output.
TABLE 1 CVRD’S IRON ORE EXPORTS BY CONSUMING COUNTRY – 1942-1950 (METRIC TONS) (1) 70 71 COUNTRY YEAR 1942 1943 1944 1945 1946(2) 1947(2) 1948 1949 1950
USA - - - - 227,397 316,406 588,106
% - - - - 59.03 73.40 81.48
Canada - - - - 84,943 71,820 74,574
% - - - - 22.05 15.22 10.33
England 35,407 62,928 127,194 101,694 - - 18,491
% 100.00 100.00 100.00 100.00 - - 2.56
The Netherlands - - - - 44,862 7,305 23,266
% - - - - 11.64 1.55 3.22
Belgium - - - - 28,050 17,396 7,315
% - - - - 7.28 3.68 1.02
France - - - - - 29,020 -
% - - - - - 6.15 -
West ------10,013 Germany
% ------1.39
TOTAL 35,407 62,928 127,194 101,694 40,962 174,290 385,252 471,747 721,765
% 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
(1) In order to standardize the data in the table, all measurements presented in sources in British tonnes (1,016 kilos) were converted into metric tons (1,000 kilograms). (2) For these years, the sources did not give the export destinations, but only the total figures. Men working at a CVRD Source: Board of Directors’ Reports, 1943-1951. mine in the 1940s.
Vale Our History Vale Our History 72 Growing sales also meant that CVRD accounted for an ever Companhia de Ferro e Aço de Vitória (Cofavi) and Companhia de 73 higher share of Brazil’s total iron ore exports. In its first year of Ferro e Aço de Itabira (later called Acesita). In order to improve ore operation, 1942, the company accounted for a little over 11% of the transportation operating conditions, a Railroad Study Center was country’s iron ore exports, but by 1950, after some fluctuations, its established in Vitória in 1949, under the guidance of Eliezer Batista weighting had risen to more than 80%. Table 2 shows CVRD’s share da Silva, an engineer. To train the center’s technicians, foreign of Brazilian iron ore exports, year by year, based on the country’s internships were provided.52 and company’s export data. Despite prioritizing the exportation of iron ore, in 1947 CVRD began selling ore to small private steel companies that started to be set up along the Vitória-Minas Railroad. These included 52 -�������������������������� See Kury, Mário da Gama, op. cit., p. 37.
TABLE 2 CVRD’S SHARE OF BRAZIL’S TOTAL IRON ORE EXPORTS
YEAR CVRD (metric tons) BRAZIL (metric tons) CVRD/BRAZIL (%)
1942 35,407 316,033 11.2
1943 62,928 322,802 19.5
1944 127,194 205,798 61.8
1945 101,694 299,994 33.9
1946 40,962 64,413 63.6
1947 174,290 196,737 88.6
1948 385,252 599,289 64.3
1949 471,947 675,574 69.9
1950 721,765 890,125 81.8 CVRD’s office building in Vitória, Espírito Santo, in the 1940s. Source: Board of Directors’ Reports, 1943-1951.
Vale Our History Vale Our History